Soft vs. Hard Inquiries — What’s the Difference?

I had an interesting credit repair moment of my own recently. My husband and I were at the AT&T store, looking to upgrade my existing account to a family plan. I’ve had the same account for over five years and have never missed a payment. That’s why I was surprised when the store rep asked the following:

“May I please have your Social Security Number?”

When a business asks for your SSN, it usually means one thing: a credit check. Confused, I wasn’t about to give up my number just yet.

“Why would you need to run a credit check to add a line to my existing account? Can’t you just look at my payment history?”

The poor guy looked just as puzzled as I was. Clearly, he wasn’t used to a customer hesitating about handing over their federal identifier. Unfortunately for him, writing about credit repair has made me more than a little vigilant. After a few more minutes of back-and-forth and a quick retreat to his manager’s office, the rep returned and informed us that unfortunately, a credit check is necessary for all new lines, regardless of the customer’s history.

“Don’t worry,” he reassured me, “my manager said it’s only a soft inquiry.”

What does that mean to the average person, I thought. If your knowledge of credit is limited, you won’t understand the distinction.

For the record, there are two types of credit inquiries: hard and soft. However, when you’re hoping to buy a house or car, lower your interest rates, or just plain keep your credit score in check, any inquiry can seem like a violation to be avoided. There are differences, though.

A hard inquiry is used when you are applying for a new loan like a mortgage or auto financing. It’s also used when you are applying for lines of credit. This inquiry allows lenders to look at your credit information and decide whether to work with you. As an unfortunate byproduct of this process, your credit score may temporarily lose a few points.

A soft inquiry, despite its name, is not categorized as a lender review. Soft inquiries occur when you check your own credit, a business offers you a promotional deal (and requires ID confirmation), or in my case, when a lender makes a change to an existing account. Unlike hard inquiries, soft inquiries will not impact your credit score.

Even though my credit score remained untarnished, there is a moral to the story: Think before you agree to a credit check. Ask questions before handing over your SSN, a number that is yours alone and could lead to years of identity theft nightmares and credit repair issues. Sure, the rep I spoke to seemed like a nice guy, but does that make him honest? Was he asking for my SSN because he needed it, or was he hoping to steal the identity of a gullible customer?

The bottom line:

You might feel embarrassed to ask questions and even annoy sales people in the process, but the hassle is worth the trouble. Don’t hesitate to speak up when it counts. After all, it’s your credit score.